The word “rivalry” is hardly sufficient to describe the bare-knuckled hostility that has characterized relations between the two companies during the cardiac stent wars over the past decade and a half. The firms fought fiercely for supremacy in the cardiac cath lab, where stents are implanted in patients, and through a steady stream of litigation over who was infringing whose patents.

Mahoney was hardly a J&J lifer, having joined as an executive in 2007, and thus was never an on-the-ground combatant in the battles with Boston Scientific. Still, we figured that for a worldwide chairman of one of the health-care giant’s three major business lines to even consider consorting with the enemy must constitute some violation of J&J’s revered corporate credo.

Then we saw Wells Fargo analyst Larry Biegelsen’s note to investors remarking about how a “friendly agreement” between the companies enabled Mahoney to jump ship while honoring certain non-compete clauses in his contract. Indeed, the transition appears to be so acrimony-free that Biegelsen suggests the move might “fuel additional speculation” about J&J ultimately acquiring Boston Scientific.

“An interesting theory but sounds like pure speculation,” counters Sanford Bernstein analyst Derrick Sung in an email to the Health Blog. He says Mahoney was picked because he is “willing to commit to executing the turnaround plan” put in place by departing Boston Science CEO Ray Elliott. Sung doubts M&A intentions or improved diplomacy were part of the equation.

That was certainly the impression Elliott himself left at an investor conference in New York today. “The last thing you want is a new CEO coming in who says ‘I’m the CEO, and I’m going to blow up this plan,’” Elliott said, according to Dow Jones Newswires. “That’s not going to take place,” he said.

Another analyst not wanting to be named says J&J isn’t interested in acquiring Boston Scientific and that his information is that Mahoney’s departure from J&J wasn’t so amicable.

J&J had worked 18 months to land Guidant, seeking an entree into the big market for devices that regulate errant heart rhythms. To be sure J&J had provided an opening for Boston Scientific when it lowered its original offer after Guidant ran into product-quality problems. But when its bid reached $24 billion, no one expected upstart Boston Scientific to swoop in with a take-out offer.

But if J&J got out-maneuvered in the takeover battle, its financial discipline clearly won the day. It called the rival bid irresponsible and walked away from a potentially transforming acquisition. At a minimum J&J has turned in a solid blue chip performance in the years since. In contrast, Boston Scientific, which was trading in the mid-$20s in the months leading up to the Guidant deal, has never recovered.

So will Mahoney, a veteran device-company executive, finally turn Boston Scientific around or will he steer it into the hands of his now-former employer?

Yesterday, Boston Scientific shares closed at $6.26, giving the company a market cap of $9.3 billion. Even with a premium as high as 50%, J&J could acquire many of the same assets for at least $10 billion less than it was ready to pay six years ago, a sobering reflection of the value of the cardiovascular device franchise. (And you think your house has lost value in the current market.)

Comments (3 of 3)

Boston Scientific has been on the sidelines for several years since the purchase of Guidant.
Michael Maloney will be able to change the direction of Boston Sci. It seems Boston Scientific is acquiring some innovative technologies that will start adding value to the company's bottom-line.
Key question is if Boston Scientific will invest in the next big opportunity: Obesity and Diabetes. Recently, Onciomed, Inc got vital patents in Obesity and diabetes. It seems these are the type of companies Boston Sci has to get involved with. Novel companies that can have a huge impact and can compete with big players.

But this is what happens, by the time Boston Sci identifies companies like the one mentioned above, they are already have commitments with other big giants. Well good luck to Michael Mahoney

1:43 pm October 15, 2011

greg wilson wrote :

Boston Scientific is a criminal corporation that spreads death and illness in the guise of cure. They refuse to correspond regarding a twice recalled stent, the TOXIC Taxus Express 2. I have permanent nerve damage and suffered a massive clot and heart attack because of the death they manufacture. Worse yet, the University of Colorado Heart Center put it in me over four weeks after the first recall Neither Boston ScienceDeath or CU had the decency to notify me as required by law. Look for this story shortly on ABC News, and who ever else I can get to spread the word on these criminal death merchants. They will get theirs, preferably in the form of bankruptcy and prison sentences.